BA gets fined for price fixing on fuel fines

[Keith T 2]

BA gets 121.5 mil quid price-fixing fine

http://news.bbc.co.uk/1/hi/business/6925397.stm

 

British Airways has been fined £121.5m after it admitted price fixing of fuel surcharges on long-haul flights.

 

BA colluded with Virgin Atlantic over the surcharges, which were added in response to rising oil prices, the Office of Fair Trading (OFT) said.

 

...

 

Qantas lifts fuel surcharges on international flights

http://www.theage.com.au/news/news/qantas-...5647956371.html

 

...The new charges will be effective on tickets issue on or after Thursday, August 9.

 

The fuel surcharge will rise by between $5 and $15 dollars, one-way, on various flights.

 

The surcharge on flights to the UK and Europe will rise to $185, from $170, and to $145, from $133, on flights to mainland USA, Canada, South America, South Africa and India.

 

Flights to Asia, Pacific and Honolulu will attract surcharges of $105, up from $100, while surcharges for travel to New Zealand will increase to $60, from $55.

 

...

 

Even less reason to ticket flights on QF 081 stock, as if the existing fuel fines aren't bad enough.

Edited August 1, 2007 by Keith T

[BC Tam 2]

This is interesting - if BA "colluded with" Virgin on the matter, why isn't there even a whimper on VS ?

[Keith T 2]

This is interesting - if BA "colluded with" Virgin on the matter, why isn't there even a whimper on VS ?

 

Because they cooperated with the authorities in dobbing in BA, allegedly...

[BC Tam 2]

Ah, the ratting-on-the-competitor routine I see. Good to see capitalism doing so well !

Make no mistake, BA would probably have done just the same if situation reversed !

[Denny Yen 0]

This is interesting - if BA "colluded with" Virgin on the matter, why isn't there even a whimper on VS ?

If you're asking why no action against VS....this is how it works based...

UK's OFT obviously follows US style punishments applied by DOJ anti-trust investigation whereby:

- 1st to confess = you get off with light fine (light slap on the wrist) or no fine (maybe a stern warning and promise not to do it again) depending on how cooperative you are or if you also point finger at other co-conspirators.

 

- 2nd to confess = you get a louder slap (i.e., heavier fine)...maybe a very short jail sentence (which can be suspended, of course)l.

 

- the rest = gets fined and some executives get longer prison sentence.

 

So whenever US DOJ officially investigates, co. are shaking and lawyers go into frenzy. Even though your co is not US-based, this is something you don't mess around when investigation starts and you're a target.

 

And don't even think that since you're not a US citizen, you're out of reach.

 

They can obtain international arrest warrant with cooperation from foreign gov't to arrest co. executives for this kind of economic crimes. Executives at VP or CEO levels had been arrested at unexpected locations such as onboard a US airliner, whilst holidaying on their yacht in countries with extradition arrangement with US...and they had been thrown into jail.

[Keith T 2]

And the US DoJ fine for BA is meant to be announced sometime soon. Double whammy for BA.

 

Now if only the ACCC does the same thing to QF et al down here!

[BC Tam 2]

If ever someone (independent of interested parties obviously) ever probe the KUL/SIN/KUL duopoly of MH & SQ, applying the same collusion principle .........

Edited August 1, 2007 by BC Tam

[Keith T 2]

A lot of these arrangements are given immunity though, most notably the multi lateral alliances. However the airlines must serve satisfy that the market will be just as competitive with the proposed arrangement, which does not appear to be the case for KUL/SIN. In Australia any potential anti-competitive behaviour will be assessed with the 'future with or without' test - the ACCC will try to imagine the market (in approximately 2 years) with said conduct, and market without said conduct - and determine the level of competition that might or might not still exist.

 

In other news, the US DoJ has handed down its fine for BA...

 

http://news.bbc.co.uk/2/hi/business/6925397.stm

 

BA's price-fix fine reaches £270m

 

BA has admitted that the actions of some staff were unacceptable

British Airways has been fined about £270m after it admitted collusion in fixing the prices of fuel surcharges.

The US Department of Justice has fined it $300m (£148m) for colluding on how much extra to charge on passenger and cargo flights, to cover fuel costs.

 

It followed a decision by the UK's Office of Fair Trading to fine BA £121.5m, after it held illegal talks with rival Virgin Atlantic.

 

Virgin has been given immunity after it reported the collusion and is not expected to be fined, the OFT said.

 

...

Edited August 2, 2007 by Keith T

[KK Lee 5]

 

Consumer protection in Asia is poor and non existent, been rip off left, right and center by price fixing. Believe Asian countries need strong and independent anti-monopoly commission to protect consumer interest.

 

[Pieter C. 5]

Even KE was fined !!!

 

BA, Korean Air to pay more than $800 million in fines

 

Thursday August 2, 2007

Antitrust authorities on both sides of the Atlantic levied heavy fines against British Airways and Korean Air for their participation in conspiracies to manipulate fares and surcharges on both passenger and freighter flights throughout this decade.

 

The carriers, which pleaded guilty and have agreed to the penalties, are among several that have been under investigation by the US Dept. of Justice and UK Office of Fair Trading since last year.

 

European and US authorities launched their probe into an alleged cargo price-fixing cartel 18 months ago and soon thereafter were joined by counterparts in Asia. In June 2006, BA and Virgin Atlantic Airways were targeted for colluding on passenger fuel surcharges. A portion of those investigations came to end yesterday with the guilty pleas and the announcement that DOJ will fine BA and KE $300 million each while OFT exacted its own £121.5 million ($246.8 million) punishment on the UK flag carrier.

 

"The Dept. of Justice is committed to vigorous antitrust enforcement and will continue to bring to justice those who fix prices and thereby deprive the American public of the benefits afforded by a truly competitive market," Attorney General Alberto Gonzales said.

 

BA, which admitted its indiscretion in May and set aside £350 million to cover potential fines, increased its fuel surcharge on "virtually every" long-haul ticket from $10 in 2004 to nearly $110 two years later, DOJ said. Freight surcharges rose to 72 cents per kg. in 2006 from 4 cents in early 2002. BA was guilty of "participating in meetings, conversations and communications" to discuss, establish and monitor the increased rates and surcharges, DOJ claimed. In a statement released yesterday, BA detailed at least five distinct fuel surcharge increases that followed communication among carriers.

 

"I want to reassure our passengers that they were not overcharged. Fuel surcharges are a legitimate way of recovering costs," BA CEO Willie Walsh said. "However, this does not in any way excuse the anticompetitive conduct by a very limited number of individuals within British Airways. Anticompetitive behavior is entirely unacceptable and we condemn it unreservedly."

 

BA said Virgin was not subject to prosecution or penalty because it brought the collusion to the attention of authorities, although DOJ said it will have to pay restitution to US "victims." BA added that the penalty imposed by OFT was reduced to reflect its cooperation with the investigation.

 

Korean, meanwhile, was charged with conspiring to fix fares charged to passengers and travel agents on flights to the US between January 2000 and July 2006 and on international cargo flights from January 2000 to February 2006. DOJ did not name KE's co-conspirators. The carrier said it "worked hard" to cooperate with the investigation and was "pleased to be among the first airlines to have reached a full resolution of the matter."

 

DOJ said Lufthansa has joined Virgin in the agency's Corporate Leniency Program, which will allow it to "avoid criminal conviction and a heavy fine." The German carrier agreed last fall to pay $85 million to settle class-action lawsuits related to the probe. American Airlines and United Airlines reached nonmonetary settlements in similar cases, while FedEx acknowledged being subpoenaed last summer.

 

 

[BC Tam 2]

Wow, this collusion theory is spreading more rapidly than the proverbial wild fire ! Bear in mind MH also flies across the Atlantic - oh dear !

[Pieter C. 5]

Here is some positive BA news, however:

 

British Airways Posts Q1 Profit Rise

 

August 3, 2007

British Airways posted a 28 percent rise in quarterly operating profit on Friday, but warned a weak dollar and soaring fuel prices would slow full-year revenue growth and raise costs.

 

Earnings before interest and taxes for the three months to end-June rose to GBP263 million pounds (USD$534 million), BA said in a statement to the London Stock Exchange.

 

Europe's third-largest airline said a consortium it belongs to that includes US private equity firm TPG was working on due diligence of Spanish airline Iberia.

 

BA said its operating margin rose to 12 percent versus 9.2 percent in the same period a year earlier. It reiterated a target of 10 percent for the full year.

 

"Profits are up as a result of the steps we took last year to control costs and strengthen our business," said Chief Executive Willie Walsh.

 

Profit before tax rose to GBP289 million from GBP191 million.

 

"Revenue is flat before exchange and reflects the continued impact of security and baggage restrictions on short-haul and premium transfer traffic, which Heathrow has been struggling to cope with," Walsh said, referring to London's biggest airport.

 

BA softened its revenue growth guidance by 1 percentage point to around 4 percent, citing the continued weakness of the US dollar.

 

It also said rising fuel costs would take a bite, rising by GBP120 million this year, GBP20 million worse than earlier forecast.

 

(Reuters)